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Freehold property prices outpace sectional title - index

Apr 20 2016 17:41
Carin Smith

Cape Town - The latest Standard Bank House Price Index (HPI) shows freehold property prices outpace sectional title for the first time since April 2015.

The HPI rose to 6.7% year-on-year (y/y) in March from a revised 5.4% y/y in February. In general, Standard Bank economists expect property prices to come under pressure in coming months, as financial conditions continue to tighten.

According to the latest HPI report, sectional title property prices underperformed freehold property prices since the financial crisis until the start of the second quarter of 2015 when it reversed. A possible reason given is a slowdown in the supply of flats and townhouses in 2015, according to Stats SA’s annual buildings completed data.

However, in March for the first time since April 2015 the freehold property price index outperformed and rose 8.5% y/y, up from 7.1% y/y in February. Sectional titles also recorded strong growth, rising to 8.1% y/y in March from 7.7% y/y in February.

The latest HPI shows that mortgage advances have continued their resilient growth against a more challenging macro-economic backdrop. Mortgages ticked up 4.7% y/y in February from 4.5% y/y in January. More than 90% of mortgages are up to date, which compares favourably to other categories of consumer credit where at least a quarter of loans are in arrears.

Standard Bank economists noted that from an affordability perspective, they remain concerned about the demand for houses and the supply of mortgages in 2016. Higher taxes, coupled with their expectation of net job losses and flat to slightly negative real wage growth in 2016, should see disposable income growth continue to slow after averaging growth of 7.3% in 2014 and 5.7% in 2015.

They pointed out that early 2016 sales volumes already show a decline in purchasing activity for both freehold and sectional title properties.

Standard Bank estimates that around 46% of mortgages given to first time buyers are extended to those earning between R16 418 and R33 333 per month, and 75% of mortgages to first time buyers are to those who earn between R16 418 and R57 333 per month.

The average purchase price of homes demanded by first time buyers falling in these income groups ranges between R600 000 and R920 000.

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standard bank  |  house prices  |  property  |  sa economy
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